And probably ahead of it’s time.
AFB came and went, and they had introduced a credit product in Kenya. Their heart was in the right place. But rolling out their credit product specifically targeted at consumerism was their first fail. I got the card free when they launched at Sierra lounge in 2013. I also got Kshs 8k to spend, and I did get a boost in my household shopping at the supermarket. And that kind of execution was the way it would end up failing.
No credit reference bureau then, so defaulters couldn’t see any need to worry if they did, and also, and more importantly, it was a consumerist product. Gave you credit to shop. Think about that. You go to the supermarket on mid month when your shopping had run out and buy stuff. What will be the motivation to pay back?
I always felt that their approach was wrong, way before they failed. If you asked me they would have targeted mama mboga (grocery vendors) with the same credit profiling and give them credit either to their bank account, a prepay card that they can withdraw from an ATM with, or mobile money, and then hope fr those to pay so that they qualify for more credit next time.
That’s what has worked for Tala and Branch, these two have seen major organic and paid for growth, and a very sticky clientele, and when I speak to them they say their default rate is not worrying. They don’t even refer to the CRBs as far as I know, but use Mpesa transaction history to understand what a customer looks like. And I think they are doing well.
Going specifically for Mpesa is expensive for the user because of the Paybill transactions and withdrawal costs, but people use them. I use them.
AFB missed that bus and called Kenya a bad market as they exited, selling their debts to debt collection company Nimble to harass defaulters after they had left. But that problem was the making of AFB’s. Because with the loan apps we have today, you can choose to do supermarket shopping, purchase office equipment, add stock to your business and get motivated to make payments so that you qualify for more credit next time. They have filed the gap of small credit that was left by banks. Let me give you an assignment. Go to your bank and request for a Kshs 10k quick loan, see how long that takes.
Even Equity and CBA that are talking about intelligent apps can’t get you that before 6 months of ‘knowing you’. Within 2 months you can have reached to over 20k in credit from Tala if you are a businessperson with daily cashflow using the app. That’s the gap that both banks and AFB failed to fill. Someone noticed, and is reaping big.